Tuesday, November 20, 2012

Investors and businesses are making strategic moves to preemptively protect themselves against tax increases proposed by Barack Obama and Democrats or the very real possibility that Washington futzes around so much we jump off the fiscal cliff, automatically raising taxes on just about everyone.

Businesses big and small, such as Leggett -and-Platt, Walmart, Hot Topic Inc and The Buckle Inc have all decided to move move its planned dividend into late December from early January to help
shareholders avoid a looming jump in the tax rate due to the so-called
fiscal cliff.

The shift by the world's largest retailer will give shareholders,
including the family of founder Sam Walton, roughly $1.34 billion in
total dividend payments taxed at the current rate.

Fiscal years for retailers typically end in late
January, so their dividend payments often are timed differently from
those of other types of companies. Exxon Mobil Corp, for instance, had
already planned for payouts in December.

"There are complex fiscal and federal tax rate issues
that may not be resolved in the next few weeks, despite the ongoing good
faith negotiations between the administration and Congress to resolve
details related to the fiscal cliff," Wal-Mart said in a statement.

"In light of this uncertainty, the board determined
that moving our dividend payment up by a few days to 2012 was in the
best interests of our shareholders."

Teen apparel chains Hot Topic Inc and The Buckle Inc
already said they would move dividends typically paid in January into
December to allow shareholders to benefit from the lower tax rate set to
expire this year.

Adding to what has become a clamor for the White House
and legislators on Capitol Hill to compromise, the Fitch ratings agency
said on Monday that the "fiscal cliff" could trigger a recession and
push the unemployment rate above 10 percent.

The there are the business owners and investors that are taking actions now meant to shield themselves from the Obama tax hikes.

Business owners and investors are rapidly maneuvering to shield
themselves from the prospect of higher taxes next year, a strategy that
is sending ripples across Wall Street and broad areas of the economy.

Take Steve Wynn, the casino magnate, who has been a vocal critic of
higher tax rates. He and his fellow shareholders in Wynn Resorts, the
company announced, will collect a special dividend of $750 million on
Tuesday, a payout timed to take advantage of current rates. Experts
estimated that taking the payout this year instead of next could save
Mr. Wynn, who owns a sizable stake in the company, more than $20
million.

For the wealthy like Mr. Wynn, the overriding goal is to record as much
of their future income this year as they can. This includes moves as
diverse as sales of businesses, one-time dividends and the sale of
stocks that have been big winners.

“In my 30 years in practice, I’ve never seen such a flood of desire and
action to transfer a business and cash out,” said Kenneth K. Bezozo, a
partner in New York with the law firm Haynes and Boone. “We’re seeing a
watershed event.”

Whether small business owners or individuals saving for retirement,
investors are being urged by their advisers to reconsider their
holdings. Along the way, many are shedding the very investments that
have been the most popular over the last year, contributing to recent
sell-offs in formerly high-flying shares like Apple and Amazon.

More:

The top rate on dividends, for example, could climb to 39.6 percent from
15 percent if no action is taken. Capital gains taxes, which now top
out at 15 percent, could rise above 20 percent, many financial advisers
say. Most investment income will also be subject to a 3.8 percent charge
to help pay for President Obama’s health care law.

Stocks that pay big dividends have been popular in recent years among
investors eager for an alternative to the meager returns on bank savings
accounts and Treasury securities.
Since October, though, the two sectors that provide the most generous
dividend payments — utilities and telecommunication stocks — have been
among the worst performers, hurt also in part by the devastation of Hurricane Sandy
on the East Coast. Utility companies in the S.& P. 500 have fallen
9.4 percent from their highs in October. Telecommunication stocks in the
index have dropped 11.3 percent from theirs, compared with the broader
index’s 6.8 percent decline from its recent high.

John Moorin, the founder of a medical equipment company near
Indianapolis, said he sold about $650,000 in dividend-paying stocks like
McDonald’s and Coca-Cola a few days after the election, worried about
the potential increase in taxes.

“I love these companies, but I’m so scared that now all of the sudden
I’m going to get taxed at such a rate with them that they won’t be worth
anything,” Mr. Moorin said.

Liberals will scream "Greed!" but these investors and business owners have every right to protect themselves, their investors and stockholders and their assets.